IPTV goes over the top in 2009

09 Feb 2009

In December I took a couple of weeks off to visit family and friends in the US. Trust me to encounter a demo of the future of television.

That's what happens when one of your friends also happens to be an engineer at AT&T. This one, who I'll call Tsang, showed me his home-built entertainment system, which comprises six PCs (all of which he built himself) networked together with Ethernet and Wi-Fi, and hooked up to a standard 29' NTSC TV set in the living room and a high-definition monitor in his study.

In the living room, Tsang showed me how he can watch streaming video on his TV set via a server in China hosting hundreds of digital movies. He streamed a recent Jackie Chan film at around 400 kbps over a 1.5-Mbps ADSL line. At 800 x 600 resolution, the picture quality was near-DVD quality. He also uses the same set-up to watch videos already downloaded to his PC. All of this was remote-controlled from a coffee-table laptop with a Wi-Fi link.

Meanwhile, Tsang also has a digital TV tuner connected to a server running Windows Media Center, which he uses to time-shift the evening news onto his PC. He also used it to watch the 2008 Olympic games, and what he didn't record off the live signal, he streamed direct from the official NBC website in high-def. He also watches TV shows hosted on Hulu on his HD monitor.

'I don't watch real television anymore,' Tsang said proudly, by which he meant vanilla free-to-air broadcast TV. 'I can put it all on my PC network and watch it on my monitor or in the living room. And I'm only doing it on a 1.5-meg broadband connection. When they upgrade the neighborhood to 6 megs, then you'll really see some action. real TV is dead.'

Now that's a demo. And it beat the pants off any IPTV demo I've seen on anyone's stand at any given exhibition.

Now, I'd hardly call Tsang a typical TV viewer. But he is the future of television - or at least one possible future. And it's one that telcos need to keep in mind when developing a video service strategy.

For a couple of years now, IPTV has been touted as a triple-play angle that can steal ARPUs from the local cable monopoly. In reality, according to research from IDC, IPTV adds only incremental value to most triple-play bundles, and ARPUs are already on the way down.

Meanwhile, the value proposition for IPTV is already changing with so-called over-the-top (OTT) internet video, the most famous examples of which are YouTube, Hulu and Netflix. While the business model for OTT video isn't much clearer than IPTV in general - none of them were making a profit at press time - in terms of technology and performance, it's well past the blocky Flash video stage even if you don't have a CDN cache in the neighborhood.

The good news for telcos - apart from the fact that users like Tsang are the exception to the rule - is that they don't have to feel marginalized by OTT video. Vendors like 2Wire are touting solutions to help telcos secure a foothold in the OTT value chain, and OTT content players are at least open to idea of embedding themselves in a telco's STB.

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